FIRS: Fowler fits the bill

Perfect. That single word summed up my reaction to the announcement of Mr. Babatunde Fowler as Chairman, Federal Inland Revenue Service (FIRS). It was not a word uttered on reflex, but on long and careful consideration of Fowler’s performance record on the job he has just left: Chairman, Lagos Board of Internal Revenue and Chief Executive Officer, Lagos State Inland Revenue Service (LIRS).

Fowler, without a doubt, is coming into his new job with a stunning resume, forged in 10 years at LIRS, where he masterminded the growth of internally generated revenue of Lagos State from a monthly average of N6billion to over N20billion

In any language, this must spell success. It did, as LIRS became a model of tax administration that other states have attempted to copy-with varying degrees of success.

That Lagos State currently generates an average of N20 billion monthly is the outcome of the radical surgical procedure carried out by Fowler on the revenue collection apparatus of the government.

Preparation for the surgical procedure was laid by the administration of Asiwaju Bola Tinubu, which succeeded the military in 1999 when democracy returned.

At the return of democracy, internally generated revenue, IGR, of the state stood at a measly monthly average of N600million.

With the state’s numerous challenges and the leanness of funds coming from the Federation Account, the Tinubu administration knew its chances of fulfilling its promise of addressing the challenges were near-zero. The alternative was to find an alternative source of funding.

The search for an alternative compelled it to look inwards.

The state that government realised is a hub for commerce, a quality indicative of its status as a dormant, but rich mine of financial resources in the shape of IGR.

The dormancy of the mine, without doubt, was the cause of the almost debilitating leanness of the state’s finances. The situation required a reversal, an urgent one which, over the next six years, yielded a dolphin-like leap to an average of N3.6billion monthly. That was the equivalent of 500 per cent.

Even at that, the administration knew the state was nowhere near its potential.

To get to the next level, it moved to refocus the tax administration system. That began in 2005 with the appointment of Fowler as the Chairman, Lagos Board of Internal Revenue and Chief Executive Officer of LIRS.

Before the appointment of Fowler, a US-trained economist, business administrator and banker of vast experience, the government had sent a bill to the state legislature, seeking to make the Board of Internal Revenue an autonomous and self-accounting body.

The bill, passed into law in 2006, made it the first autonomous revenue board in the country.

What followed was the implementation of radical changes in tax administration. But it was by no means a cakewalk.

Fowler and his team at LIRS were taking on a monster in form of widespread tax avoidance, a task not many would relish undertaking. The LIRS kicked off in 2006 by breaking down barriers to voluntary tax compliance. This was achieved through making tax assessment and payment easier by establishing mini-tax offices in markets around the state.

Currently, there are about 50 of such offices across the state. Two years later, it introduced the Self Assessment Filing System for individuals, a tax regime that allows the taxpayer compute his own tax liability, pay the tax due and produce evidence of payment.

The system has ensured that individuals could conveniently pay their taxes at any of the 1,200 branches of the designated banks and the LIRS tax stations. It has also made it possible for taxpayers to obtain their receipts within 72 hours of payment. Alongside that ran a heavy public enlightenment campaign to raise awareness among businesses and individuals on how their taxes would benefit citizens, communities and commerce in the state.

An important part of the campaign was the use of prominent Lagos residents across tribal, religious and professional lines in testimonial adverts on the importance of fulfillment of tax obligations.

LIRS also designed its system in a way that ensures that all payment to the Lagos Internal Revenue Board are made directly to designated revenue collecting banks for the state. All of these are electronically linked to databases that issue electronic receipts to tax payers. In addition, LIRS introduced personal electronic tax clearance cards (e-TCC), the first of its type in the country. These measures banished the opacity that characterised tax collection in the past, as the process became more transparent to tax payers, who were granted access to their records via the internet.

The results were astounding. Between 2008 and 2012, the average monthly IGR of the state rose from N18.9 billion to N23billion. During the 2012 Annual Public Lecture of the Institute of Chartered Accountants of Nigeria, ICAN, Governor Babatunde Fashola proudly declared that Lagos State IGR accounted for over 65 per cent of government revenue, making the state considerably less reliant on funds from the Federation Account. Inline image

Data from the National Bureau of Statistics, NBS, and Joint Tax Board, JTB, confirmed Fashola’s claim as well as the success LIRS has engineered. Released in December 2013, the figures showed that Lagos State generated more revenue than any other state of the federation between 2010 and 2012. The figures show that the state generated N185.9 billion in 2010, N202.76 billion in 2011 and N219.2 billion in 2012.

Of the N219.2 billion in 2012, Lagos earned the highest revenue of N172.44 billion from PAYE. The sum of N4.36 billion came from road taxes, N1.89 billion from direct assessment of companies domiciled in the state, while N40.513 billion came from other revenue sources.

About N120.25 billion was earned through PAYE in 2011; N7.97 billion from direct assessment, and N74.54 billion from other sources, while N104.681 billion came from PAYE in 2010; N7.51 billion from direct sources, and N73.704 billion from other sources.

Oil-rich Rivers State placed a distant second on the chart, earning N49.59 billion in 2010; N57.19 billion in 2011 and N66.28 billion in 2012. The sum of N55.1 billion came from PAYE in 2012; N485.9 million through road taxes; N22.075 million through direct tax assessment and N10.668 million through other revenue sources.

The figures showed, convincingly, that Lagos is the only state in the federation capable of doing without funds from the Federation Account.

Fowler’s tenure at LIRS attracted interests from many states, including Delta, Edo, Osun, Oyo, Ekiti, Kano and Bayelsa, to study the model and adopt methods bequeathed by Fowler. Square peg in a similarly shaped hole? You bet.